webwiz
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Post by webwiz on Nov 26, 2015 8:20:09 GMT
FS have confirmed that interest continues to accrue whilst a loan is on the SM. You can check this for yourself by choosing a loan on sale on consecutive days and the price should have gone up.
For example on 26.11 £100 of loan 1009446459 is costing £107.07 . Tomorrow it should be £107.10
I have been able to check today against yesterday on one loan and the price has indeed gone up by the expected 0.03%.
Later edit: And FS say they are already working on improving the system
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pom
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Post by pom on Nov 26, 2015 9:39:56 GMT
I really don't think they thought through the premiums - the ultimate in caveat emptor. However as I was just waiting for my loans to complete (as I'd decided I wasn't going to continue with FS due to lack of secondary market etc) I was happy to exit those that I could early (and got 1% on some of them...). Tho now they have a secondary I'm also now wondering if I should reconsider further investment - see how it shapes up I guess. Good to see that big hitters only keep their incentive bonuses on what they hold to term tho - otherwise we'd have a flipping nightmare  |
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sqh
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Before P2P, savers put a guinea in a piggy bank, now they smash the banks to become guinea pigs.
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Post by sqh on Nov 26, 2015 10:25:58 GMT
I think the SM is a great innovation. It's fast, easy to understand. In fact, the whole platform gets better and better. It's a market so premiums will find a sensible level.
A lot of loans roll-over these days, so this gives new investors a chance to build up a decent sized chunk in loans they like.
I can't see many loans selling at premiums of 3%, 4% or 5%, but a fairly new loan could justify 2%, for non-tax payers, or if FS introduce a P2P ISA in April next year.
Buying loans in a normal account and selling to an ISA account after 5 months is a perfect solution.
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Monetus
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Post by Monetus on Nov 26, 2015 10:28:01 GMT
Yes I've thought about this some more and the premiums situation isn't a great idea by any means.
I always think that the benefit of a secondary market is to allow people who want to get out of a loan early have the ability to liquidate their position - especially as the loan terms on Funding Secure are only six months so it's not exactly a a large commitment already.
I think allowing people to sell at a premium is going to lead to people over investing in loans, hoarding loan parts, and a lack of secondary market liquidity. Already I see hardly anything going up at parity and the majority of decent-sized positions at a 5% premium - making them unviable to purchase if people sit down and do the maths.
The other issue is that it's not currently clear to buyers what their potential remaining return will be. Some people are surely going to purchase loans at a 5% premium with 30 days left and not realise that they are actually losing money. Surely sellers shouldn't be able to be in the position to leave their loan purchasers out of pocket? It seems quite mad to me.
I would personally love to see a change to only allow people to sell at either parity or a discount
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arbster
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Post by arbster on Nov 26, 2015 10:47:40 GMT
In case you've not seen it, I put up a poll here which appears to show general agreement that the current implementation is not what people want. |
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hendragon
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Post by hendragon on Nov 26, 2015 10:47:54 GMT
with respect to lenders "hoarding loans" FS do have a policy of bid restrictions on new loans which should help prevent the rise of the flippers
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arbster
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Post by arbster on Nov 26, 2015 10:49:18 GMT
with respect to lenders "hoarding loans" FS do have a policy of bid restrictions on new loans which should help prevent the rise of the flippers Yes, but as someone who often bids below the maximum on loans even I would be tempted to take the maximum and try my luck with a premium on the SM, especially given the general appetite for diversification. Surely this isn't behaviour FS wishes to encourage.
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hendragon
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Post by hendragon on Nov 26, 2015 10:54:31 GMT
with respect to lenders "hoarding loans" FS do have a policy of bid restrictions on new loans which should help prevent the rise of the flippers Yes, but as someone who often bids below the maximum on loans even I would be tempted to take the maximum and try my luck with a premium on the SM, especially given the general appetite for diversification. Surely this isn't behaviour FS wishes to encourage. If FS have set a maximum bid what would be wrong with each lender bidding up to it? As long as the bid limit is small the effect on the platform imho would be minimal. A lender over-bidding their personal limit is a matter of individual choice, and should they get stuck with loan parts they don't wan't or can't sell it will soon stop.
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ben
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Post by ben on Nov 26, 2015 11:08:44 GMT
not so sure the secondary market is such a good idea on here, all it will do is encourage people to buy early and dump of after a few months
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ianj
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Post by ianj on Nov 26, 2015 11:17:11 GMT
I haven't yet seen any loan on offer that I think would return a 10% yield, and I'm sure there are many that would, assuming repayment at six months (not rolled-over), result in an eventual loss to the buyer. I've played with the figures, having assumed 12% p/a = 1% p/m (knowing this is not strictly precise), and the results produced are not encouraging for anyone looking to buy on the SM. By my reckoning, a 12% loan with 5 months remaining purchased at a 5% premium would 'wipe it's face', profit and yield = 0 The same loan at 1% premium would achieve approx 9.5% yield. A 12% loan with 1 month remaining purchased at a 1% premium would 'wipe it's face'. any higher premium would return a loss. The same loan purchased at par would return approx 11.5% yield. For the sake of those that have already made purchases, I can only hope there's a major flaw in my calculations! Edit: Just noticed that Monetus was making similar points earlier. |
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Post by mrclondon on Nov 26, 2015 11:38:12 GMT
Thirty plus parts at 1% have been hoovered up in the last hour or so, leaving just 2 out of 226 as I type this at 1% premium (or less.)
That included my Lexus part at 1% premium, with just 36 days left.
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arbster
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Post by arbster on Nov 26, 2015 11:43:32 GMT
By my reckoning, a 12% loan with 5 months remaining purchased at a 5% premium would 'wipe it's face', profit and yield = 0 The same loan at 1% premium would achieve approx 9.5% yield. A 12% loan with 1 month remaining purchased at a 1% premium would 'wipe it's face'. any higher premium would return a loss. The same loan purchased at par would return approx 11.5% yield. I've not played with the figures - what rate of tax are you assuming on the interest that the buyer is liable for? By rough maths, at 20% tax the buyer is liable to pay £1.20 tax per £100 capital on at 12% 6-month loan. If they're buying with 1 month remaining, the interest per £100 capital is £1, thus taking into account the tax liability the buyer is losing 20p per £100 capital invested. I think.
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SteveT
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Post by SteveT on Nov 26, 2015 11:47:07 GMT
Thirty plus parts at 1% have been hoovered up in the last hour or so, leaving just 2 out of 226 as I type this at 1% premium (or less.)
That included my Lexus part at 1% premium, with just 36 days left.
I think a premium up to 1% can be justified, even on relatively short-dated parts, given the potential for many FS loans to be renewed for another 6 months (or more). However anything beyond 1% is pretty steep and 3%+ is nuts.
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Post by mrclondon on Nov 26, 2015 11:56:02 GMT
This is utterly nuts. Just sold a part with 43 days remaining for 2% premium. Guaranteed loss to buyer, even before they pay tax on my "interest".
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arbster
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Post by arbster on Nov 26, 2015 11:57:04 GMT
This is utterly nuts. Just sold a part with 43 days remaining for 2% premium. Guaranteed loss to buyer, even before they pay tax on my "interest". Right, with such fools around I'm listing everything at "guaranteed loss" rates and will take the profits.
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